Power

What does tech think of a potential M&A moratorium? 'A fire hose to blow out a candle'

The proposal by Elizabeth Warren and Alexandria Ocasio-Cortez draws on concerns over tech giants whose influence only seems to be expanding during the pandemic.

AOC

Rep. Alexandria Ocasio-Cortez and Sen. Elizabeth Warren are proposing a partial ban on mergers and acquisitions, arguing that big corporations could consolidate power by buying struggling companies.

Photo: Scott Heins/Getty Images

Warning of "vultures" waiting to snap up smaller competitors who've been battered by the economic collapse, Sen. Elizabeth Warren and Rep. Alexandria Ocasio-Cortez are proposing a coronavirus-era variant on efforts to limit what they see as the growing monopoly power of the biggest corporations: a temporary ban on some mergers and acquisitions. The tech world's response? The lawmakers are missing the mark and might do much more harm than good.

"As applied to the tech industry, the concerns that are being raised are not applicable," said M&A lawyer Alessandra Simons. "It's like trying to solve a problem by using a fire hose to blow out a candle."

A partner at Goodwin Procter, Simons is helping videoconferencing service BlueJeans be acquired by Verizon, a move the Federal Trade Commission is allowing to go through at an accelerated pace, according to a notice posted Monday. She asserted that, for the most part, big tech companies don't seek to muscle out competitors, but rather acquire small businesses to "expand their product offering," which is not necessarily in the wheelhouse of antitrust regulators.

Warren and Ocasio-Cortez's proposal, regardless of its success, draws on the tension over tech giants whose influence only seems to be expanding during the pandemic, warning that "big tech has moved to snatch up struggling startups." It echoes a similar call this week from House Judiciary antitrust subcommittee chair David Cicilline, a Democrat from Rhode Island. "As millions of businesses struggle to stay afloat, private equity firms and dominant corporations are positioned to swoop in for a buying spree," Cicilline said.

Warren, Ocasio-Cortez and Cicilline all say they want to include a merger moratorium in an upcoming COVID-19 economic stimulus package, known as "Phase 4" in D.C. parlance. But they're facing resistance from Republicans and representatives of the business world, who warn that an all-out pause on M&A could stall an already suffering economy.

Noah Phillips, a Republican FTC commissioner, said in a phone interview Tuesday that the FTC, one of the two regulators tasked with overseeing antitrust law, has found that mergers and acquisitions are down significantly amid the pandemic as stock values plummet and businesses cope with having less cash on hand.

Phillips said it's "plausible" there will be a wave of tech acquisitions down the line. (In a recent survey, only 13% of tech, media and telecom CFOs said COVID-19 was decreasing their appetite for takeovers, compared to 25% across industries.) "But it's the opposite of what we're seeing right now," said Phillips, who has spent much of the week criticizing the Democratic merger moratorium idea.

Phillips confirmed that the FTC is continuing to forge ahead in its review of a decade of acquisitions by the largest tech companies and its antitrust probe of Facebook. "I think we ought to be driven in policymaking by the facts on the ground," Phillips said.

Warren and Ocasio-Cortez's proposal, which they plan to write into legislation, would ban "risky" mergers and acquisitions that involve companies with more than $100 million in revenue or financial institutions with more than $100 million in market capitalization. The prohibition would extend to private equity companies, hedge funds or companies that are majority-owned by a private equity firm or hedge fund, as well as to all transactions that must otherwise be reported to the FTC.

The lawmakers also want the FTC to establish a legal presumption against M&As that pose a "risk to the government's ability to respond to a national emergency."

The sweeping proposal is unlikely to gain serious traction in Congress. Several GOP members of the House Judiciary Committee were frustrated when Cicilline announced his proposal last week without giving them a heads-up, a GOP aide close to the committee's thinking told Protocol. Cicilline has not yet released the text of his proposal, which will likely take the form of a letter to House leadership, but he said he hopes to prevent dominant corporations from going on a "buying spree" while still leaving room for "merger activity that is necessary to ensuring that distressed firms have a fresh start."

"We are deeply skeptical of what Cicilline's proposing here," the GOP source said, calling it an "antitrust power grab in the middle of a crisis."

Nonetheless, that Warren, Ocasio-Cortez and Cicilline are coalescing around the idea provides a measure of progressive energy — which has effectively shaped the policy debate around tech for the past two years. "These companies should be using their cash reserves to help their employees, not to acquire more power," Ocasio-Cortez said in a statement. "If we don't stop predatory M&As now, the actions of big corporations will have decades-long economic consequences — for all of us."

Netchoice, a tech trade group that counts Facebook, Google and Twitter among its members, has started to lobby against the moratorium proposals. Carl Szabo, Netchoice's vice president and general counsel, told Protocol that for many startups, which are notoriously unprofitable and experiencing mass layoffs due to COVID-19, mergers and acquisitions are a matter of survival.

Doug Cogen, a partner and co-chair of the M&A team at Fenwick & West, said many small companies rely on larger companies to "scale" their products. "A blanket moratorium is much too blunt an instrument at this critical time," Cogen said.


Get in touch with us: Share information securely with Protocol via encrypted Signal or WhatsApp message, at 415-214-4715 or through our anonymous SecureDrop.


Several smaller-scale congressional proposals emerged last month that would allow the FTC and Department of Justice to take more time reviewing emerging deals in light of the logistical difficulties posed by COVID-19. But none of those narrower proposals appeared in the final stimulus bill, noted Jacqueline Grise, the chair of law firm Cooley's antitrust and competition practice group, making it less likely that a broader ban could make it into the next legislative package.

"We have heard from a lot of clients that are concerned," said Grise, including "private equity, bankers and everybody wanting to get a read on whether this is really likely to happen or not."

"We say that we understand there's a reason to be potentially concerned, but at the end of the day … those proposals in the past didn't get passed either and those were less aggressive proposals," Grise said. "We tell clients we're watching it very closely, but nothing is expected to happen soon."

Fintech

Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep ReadingShow less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep ReadingShow less
FTA
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.
Enterprise

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep ReadingShow less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep ReadingShow less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.

Enterprise

Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep ReadingShow less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories
Bulletins